Judge Allows SiriusXM to Appeal Big Ruling Over Pre-1972 Music

The Turtles Band - H 2013

The Turtles Band - H 2013

In the very consequential litigation over pre-1972 sound recordings, SiriusXM has finally gotten some luck after a New York federal judge on Tuesday agreed to certify an interlocutory appeal. As a result, the 2nd Circuit will now address a legal issue with the potential of giving the owners of older songs more compensation much to the chagrin of radio operators who have long assumed that copyrights in pre-1972 sound recordings didn't cover the right to exclusive public performance.

In 2013, Flo & Eddie of The Turtles filed separate lawsuits in California, Florida and New York, aiming to use state laws to punish SiriusXM for misappropriating their common law rights to sound recordings.

Thanks to amendments to copyright law, sound recordings authored after 1972 are covered under federal copyright protection and there's licensing protocol and rate-setting procedures that govern their distribution. Older hits from artists like The Rolling Stones, The Beatles and Bob Dylan, on the other hand, were left out — some believe purposefully. For a long time, promotion was seen as payment enough by radio operators. Then, digital distribution changed the economics of the music business and owners of sound recordings have increasingly agitated for more income from public performance.

Read more Big Shake-Up to Music Licensing Regime Embraced by U.S. Copyright Office

In September 2014, Flo & Eddie won a head-turning summary judgment ruling in California that their public performance rights were violated. That was then followed by a key ruling in favor of major record labels in their own battle against SiriusXM and then another victory for Flo & Eddie in New York. The judges in the case have resisted SiriusXM's pleas for reconsideration and in California, the company couldn't certify an interlocutory appeal.

But as other companies like Pandora and Sony face suits over pre-1972 music, and with terrestrial radio operators and other sound recording users wondering who might be next to face legal wrath, the judge in Flo & Eddie's New York case has decided to grant permission to SiriusXM to appeal her ruling denying it summary judgment.

"There is indeed a critically important controlling question of law in this case," writes U.S. District Judge Colleen McMahon in her decision today. "If the Court's holding that they do have such a right is incorrect, then significant portions of this lawsuit — including the public performance copyright infringement and unfair competition claims — will have to be dismissed."

The judge also says that an appeals court might force her to come to different conclusions about such issues as whether the defendant had fair use to make temporary copies to facilitate the public performance of sound recordings.

The issue of pre-1972 recordings hasn't been addressed substantially by any appellate court, and SiriusXM has also been making bones about whether state laws being read to confer public performance rights impermissibly interferes with interstate commerce.

Judge McMahon says the controversy presents a "difficult legal question about which reasonable minds can differ," further noting "the complicated history of public performance rights" — how Congress addressed such rights between 1971 and 1995. It "warrants a close look by a controlling court," she writes in her certification order, which also stays further proceedings pending the appeal.

Not only does the judge's decision prime the case for the 2nd Circuit docket, but given the stakes, it also might also be the first step towards a showdown at the Supreme Court. Of course, there's no appellate split quite yet on the issue — one of the primary factors that usually interests the high court — but there's definitely potential in a legal issue that could go as far as impacting the type of music being played in restaurants and bars throughout the nation.

In fact, the uncertainty over pre-1972 music could be a big impetus spurring changes to copyright law. Last week, the U.S. Copyright Office proposed many shake-ups to the current music licensing regime. Among them was fully federalizing pre-1972 recordings. While some changes to copyright law like allowing publishers to nix cover songs on digital outlets figure to get mere soft support by industry advocates, expect the issue of pre-1972 music to spark a full-throated lobbying campaign by many big distributors of music.

SiriusXM is being represented by Daniel Petrocelli at O'Melveny & Myers. The Turtles are being handled by Harvey Geller and Henry Gradstein at Gradstein & Marzano.

Petrocelli comments, "Appellate review will be an important step toward resolving issues of crucial significance that threaten to upset more than a half century of established practice in the broadcast and music industries."

The lawyers on the other side respond, "If the Second Circuit decides to take the case, we are confident that it will conclude that depriving artists of compensation for their work is not a practice that should be condoned."

One procedural note: Judge McMahon has certified a question over an interpretation of New York law, which seemingly gives the 2nd Circuit some discretion to kick the case over to a New York state appeals court (which also would probably mean the case never hits the Supreme Court). However, SiriusXM continues to raise constitutional arguments relating to the Commerce Clause, and so the 2nd Circuit also has an opening if it chooses to explore some of the federal issues implicated in the dispute. In short, the appellate path forward isn't entirely clear at the moment. The appeal is happening, but how so remains to be seen.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner